Towards a Cambrian Explosion in Government

Free To Leave?

Some believe that individuals are free to leave the U.S., no questions asked. Unfortunately, this is not the case. A few points:

Citizens abroad who make more income than a certain threshold (I believe about $85,000) must pay U.S. income tax equal to the amount he would pay were he residing in the U.S.. The number of countries that tax in this way–on the basis of citizenship instead of residence–is very low. (It’s gated, but see Taxing American Expats in the Economist.)

It is illegal for a U.S. citizen to keep and fail to disclose any foreign account whose value exceeds $10,000. Failure to disclose results in a fine equal to fifty percent of the account’s value. (More info here.)

In accordance with the 2008 Charlie Rangel bill perversely named Heroes Earning Assistance and Relief Tax (HEART), any U.S. citizen or Green Card holder who renounces his ties to the U.S. will be taxed on all his assets as if they were sold on the day of expatriation (equivalent to a mark to market capital gains tax). There are a few exceptions and thresholds, for instance the value of assets must exceed $600,000. Here’s a good summary. Here’s another.

True–these laws only apply to the well off. But the consequences affect many. Max Marty suggested I orient my question on the right of exit towards the future:

“Should individuals, groups, or businesses, seek jurisdictions with an eye towards minimizing the future cost of exiting from those jurisdictions?”

Well, the HEART Act certainly gives potentially productive immigrants and investors less reason to come to the U.S.. It also removes a powerful check on government expansion. And, if we care about such things, it takes away the right of these people to exit freely.

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I find it bizarre that people who want to be shed of excessive externally imposed coercion (aka, government) spend a lot of their time inquiring into how the government would have you be shed of them. As if following their rules had been helpful at any point thus far.

There is also the interesting case of Peter Watts who was beaten and arrested by border pigs while trying to leave the country.

The problem with moving to Switzerland is that they don’t let anyone in unless they have a lot of money. It’s not a “go east, young man” kind of destination.

On the topic of city-states, I’d like to get everyone here’s opinion on something different, the separation of city, state and society we are facing. I’ve written it up in a place completely different than my blog.

I wouldn’t even consider Switzerland for unrelated reasons. My interest has been and remains Asia (East, South, and South-east). I believe Asia will be the growth and opportunity region of the world for the next 30-50 years. I would choose Singapore. Any ocean city-state that get built will be near Asia as well. So, Asia’s the place, now and in the future.

Growth in Asia will stagnate 50 years from now once the region catches up with the West. This is because Asians are not by nature pioneering people. Once they feel they have achieved parity with the West and no longer feel inferior to anyone, they will turn inward just as they have done periodically in the past 3,000 years of their history. By then, I will either be dead or have radical life extension (hopefully the latter). Either case I won’t care because, if the latter, space colonization should be an option by that time.

This will discourage immigration to the U.S. by Asian and other immigrants with money. Investors will not seek U.S. citizenship either. Those without money coming to the U.S. seeking opportunity will likely not seek citizenship status if they think they can make it big (e.g. start-up business) and will probably leave within the 10-15 year period cited by the law.

This is relevant to the city-state concept because it will make it expensive for those Americans (like Peter Thiel) who have money to quite being U.S. citizens. Once there are city-states (say 2030 or so) people will leave the U.S. seeking opportunity before they have accumulated $2 million in assets or whatever the limit will be at the time. Since the city-states, by virtue of being freer economies, will offer more opportunity and dynamism, it is likely that young people or other people seeking opportunity will go to them before they have large amounts of financial assets.

You know, this law could well encourage people to leave the U.S. (give up U.S. citizenship) and live in places like Switzerland or Singapore when their assets get near to the taxable limit. If I had, say, $1.8 million or so in assets, I would consider leaving now and would go to either Switzerland or Singapore (probably Singapore, since I have lived in and like living in Asian culture, I don’t Europe at all). I suspect others will do the same. Both Swiss and Singaporean passports offer global travel opportunities.